ADDIS ABABA, ETHIOPIA (PANA) – Ethiopian Prime Minister tribal dictator Meles Zenawi has ordered a total freeze in government borrowing, but the country still faces a major foreign reserve crisis with the current reserves only enough to cover one month and just a few more days.
The Ethiopian tribal regime, which has previously fixed its public borrowing to 1.5 percent of the country’s Gross Domestic Product (GDP), is aiming to cut domestic borrowing to zero while tightening money flow to the economy at 8 percent.
The measures announced by the Prime Minister are aimed at reversing a potentially dangerous economic crisis, sparked by the country’s growing demand for imports against falling export volumes and worsened by the global financial crisis across the world.
“The facts are less bleak than have been portrayed. We have had massive inflationary pressure and there is a serious strain on the balance of payment. We needed steps on the monetary front, foreign exchange markets and fiscal measures,” Meles said. The annual inflation currently stands at 45.6 percent.
Ethiopia, which depends mainly on coffee, tea and leather exports, is suffering from an increase in the level of imports, caused by the rises in the price of crude oil, fertilisers and other essential cereals, against a crushing shortage of foreign currency inflows.
The National Bank of Ethiopia (NBE), the central bank, said foreign remittances had increased over the past half-year by 19 percent, but the Prime Minister said the level of foreign remittances might have been higher were it not for the global financial crisis.
“The maximum (step) is to ensure zero borrowing by the government from 1.5 percent of the GDP to zero to reduce the budget deficit. The International Monetary Fund (IMF) have applauded this decision,” the Ethiopian Prime Minister told a news conference.
{www:Ethiopia} has limited bank lending in a move aimed at boosting foreign currency reserves. This has been done to avoid the possibility of using bank interest rates as the other tool to curb bank borrowing.
“You cannot use the interest rates to reign in the economy. You have to limit bank lending,” the Premier said.
NBE has taken steps to limit bank lending by asking the local commercial banks to triple raise their reserve money requirements to 15 percent from 5 percent, private business weekly, the Capital newspapers, reported.
The measures are also expected to curtail the movement of money to the economy to less than 20 percent, from the 23 percent at the end of the last fiscal year, the paper reported.
But Meles said that the government’s target is to cut money supply to 8 percent.
“The latest credit crunch has come solely as a result of the NBE policy to defeat inflation as their primary objective…but the most challenging issue is the foreign currency shortage and the speedy depreciation of our currency,” Meles said.
He said that the depreciation of the local currency, the Birr, was done recently to relieve the economy of the currency imbalance, noting that a speedy depreciation of the Birr could also speed up inflation.
The IMF has agreed to Ethiopia’s depreciation of the currency, which saw the Birr touch an all time low of 11.46 to the US dollar in January, from a high of 9.15 in December.
IMF has given Ethiopia US$50 million as a result of the economic policies it has deployed to stabilize the domestic economy and rid the country of an economic crisis.
“We may have had a perfect storm, but the storm is behind us now. It is also the opinion of the IMF. If the IMF is happy, we can rest assured the steps are effective. We expect a single digit inflation by June-July this year,” the Ethiopian Premier said.
9 thoughts on “Ethiopia’s regime runs out of foreign currency reserve”
It is now widely believed the Ethiopian central bank is in the verge of collapse. Just recently they further devalued Eth. Birr by 5% against US dollar, even though one can buy up to $15 Birr in the open market. There is a credible fear that the country is heading to Zimbabwe like hyper inflation, making things virtually ungovernable in the country. The meager exports are now being shut down for lack of foreign reserve all while import tariff has doubled in Djibouti’s port. As the sign of the cash strap Woyane illustrates, for the first time it is laying off civilian workers within the bureaucracy while feverishly consumed in how to hold the military together for fear of mutiny by its starving army. Woyane’s final agony is for all to see and there is no escape from this truth.
This of course is unfolding in the backdrop of the Diaspora situation who have collectively has amassed unparallel wealth in the last 4 decades to eclipse the sum total wealth of every Woyane in Ethiopia. This fact has been known to them better than anyone and the intensive campaign to hood wink the Diaspora (beginning in 2001 till present) to invest and affirm a vote of confidence in Meles’s kingdom. Sadly sufficient group of the Diaspora have so far been indifferent to the suffering of their people and chose to enrich themselves only to find their investment is now in the verge of total meltdown. Even if they were to cash out it will be whirl pooled in the sea of worthless Birr unable to convert into any useable currency. By some estimate (and unlike no other of its predecessors) Woyane has been a beneficiary of Ethiopian Diaspora’s dollar even more so than the total money received and loaned by donor nations. Such is the legacy of these despicable Woyane underwriters who live among us, These so called Ethiopians at best accepted Woyanes premise of good governance, at worse, convincingly surrendered to the agent of Woyane to provide Meles and his thugs a highly sought after commodity, HARD CURRENCY.
For those of us who participated in the struggle to end apartheid in South Africa there is clear reminder that the economic boycott against apartheid indeed have contributed to the demise of that evil system. Once more Let us unite to boycott Woyane (the other apartheid system) to finally flush it out from Ethiopia and the African continent itself. At any rate, buyers beware your name with your title is proof evidence of your trust of an alien regime who was busy destroying your own country while you were investing in his schemes. Instead, boycott any investment that involves Woyanes central bank and liberate your country by denying Woyane the life blood of its survival.
Long Live Ethiopia!
Bertu
The whole world knows weyane has looted all the gold and money from the treasury. weyane knows very well it’s days are numbered, and it is making all the necessary preparations for life outside Ethiopia by transfering the country’s wealth to foreign banks and make it bankrupt. What a pathetic bunch of thieves!
shame on you zenawi. Your presence will not going to stop anything and your days are numbered.
Ethiopia’s problems of inflation are not the sole result of high demand. Demand is only half side of the problem. Inflation is also supply side problem. There is no enough food production (wheat, tef,f peace, beans, sorgum, corn, sugar oil seeds etc) to satisfy the market. The country coudn’t realize its full potential in agriculture and produce more because of the backward communist land policy of Meles’s government.
You can not defeat inflation while supply is arrested because of policy constraints. Meles and his so called “economic advisors” couldn’t understand this natural relationship. Ethiopia can not be food-self sufficient unless the current backward government and its inept leaders are removed from power.
Gold is around US$1,000 per on. but the shameless Woyanee-Tigraian mafias did tell us before “there is no gold reserve, what we have is a fake steel-plated-gold”. This is after depositing the real gold in a place or a cave that they only know, most likely in Tigrai.
This time they are telling the world without shame “there is no foreign currency reserve left”. As the mystry of the real gold, the foreign currency is hidden in the place only the Woyanee-Tigraian mafias know.
For 18 years the Woyanee credo has been:
“Woyanee-Tigrai eskitelema: Ethiopia tidma::”
Bertu,
I agree with you. Do you have an idea how to send money to Ethiopia other than the Western Union – Woyane Bank ?
There are many clueless Ethiopians who do not want to send money though woyane accessible channels but do not have equally any idea if there are other ways to make the money reach to families and friends, etc, i.e., only the people there would make the exchange privately. That will be a double benefit: 1) get better exchange rate, 2) deprive woyane from using foreign currency to purchase guns.
Thank you debretabor that is the fact on the ground in ethiopia that is being ruled by the tigrayan mafia.
Lots of talk since 2005. Meles is still there. Instead of talking, help organize grass-root boycott group to paramize woyane. Every individual can get at least 5 to 10 person to convince them not to be served by woyane business organizations, banks, stores, etc.
the country’s social political and economic situation is above Melese’s understanding – he does not know what he is saying throwing out economic jargons does not mean he understands the circumstances the country is near – the country is going down the hill at a faster speed when it hits bottom he we go the the sudan or back to somalia